Overseas airlines see strong growth potential in Australia; part one: when the new widebodies arrive
Asia Pacific airlines have ramped up their services to Australia to leverage a boom in international travel demand, and many are targeting further expansion in this market as they look to grow their widebody fleets.
Several overseas-based airlines have already boosted their Australian capacity beyond pre-pandemic (pre-COVID-19) levels. This has strengthened the country's role as one of the most important markets for Asian airlines, helping them offset the slower recovery in other countries, such as China.
Philippine Airlines, Thai Airways, Vietjet and Air India are among those airlines that are bullish about Australia, and senior executives from these airlines discussed this market during the CAPA Airline Leader Summit Australia Pacific held in Brisbane on 12-13-Sept-2024.
They talked about their current presence in the Australian market, where and when additional growth might come, and the potential for overseas airlines to serve the new Western Sydney International Airport.
The executives also outlined some of the constraints that will need to be overcome for this growth to occur, in areas such as bilateral rights, visa processes and aircraft availability.
Part one of this analysis will cover Thai Airways, Philippine Airlines and Air India, and the second part will look at Vietjet, Western Sydney Airport and growth challenges.
- Thai Airways has 35 flights per week to Australia, and 16.3% more seats than in 2019.
- Australia accounts for almost as much revenue as Europe and North Asia markets for Thai.
- PAL has lifted its Australian flights by 37%, and plans to add more frequencies.
- Air India also has more Australian flights now, with further increases likely.
Thai Airways has lifted its Australian service this year, which helps feed into transit traffic
Thai Airways is now operating more Australian capacity than in 2019, said Otto Gergye, the airline's advisor to the CEO and director of revenue and network.
Thai has 35 flights per week into Australia, on routes to Sydney, Melbourne and Perth.
The chart below shows that the airline is operating 16.3% more seats between Bangkok and Australia than at the same point in 2019.
A big jump in capacity can be seen at the end of Mar-2024, representing the start of flights to Perth, and the addition of a second daily Sydney flight.
Thai Airways: capacity between Bangkok and Australia, as measured in one-way weekly seats, 2019-2024
The airline is seeing very strong demand in Australia, not just for travel to Thailand, but also connecting to Thai Airways' routes to the Indian subcontinent and Western Europe, said Mr Gergye.
This is helping Thai rebuild and strengthen its Bangkok hub and substantially improve its traffic flows to Europe and elsewhere.
Australian demand is particularly high in premium cabins. This means Australia "definitely punches above its weight" in terms of passenger revenue, Mr Gergye said.
The country ranks closely behind Europe and North Asia as measured by revenue generated, even though those markets have about 90 and 100 flights per week, respectively.
There is significant growth potential for Thai in the Australian market. Brisbane "features prominently on our radar", Mr Gergye said, although "it is a question of getting enough aircraft" to launch new routes.
Thai ordered 45 Boeing 787s in Feb-2024, but the first of these is not due until 2027.
Australian tourism is a major factor for PAL, but Philippine outbound has a lot of potential too
Philippine Airlines (PAL) has "quite a big footprint" in Australia, said Alex Featherstone, the airline's vice president for revenue management and commercial planning.
PAL operates 22 flights a week to Australia, covering Sydney, Melbourne, Brisbane and Perth. This is up from 16 flights to three destinations before the COVID pandemic, meaning there has been a 37% increase in frequencies.
Capacity - as measured by ASKs - is 27% higher. The lower rate of increase compared to frequencies is because some of the growth has been on narrowbodies instead of widebodies.
Australia represents the fifth largest visitor source market for the Philippines, so it is an important inbound flow, Mr Featherstone said.
While there is some traffic connecting via Manila to countries such as Taiwan, Japan and Korea, the airline's main focus is demand between Australia and the Philippines.
This is driven by tourism to the Philippines and is also helped by a large Filipino population in Australia, which spurs traffic in both directions.
PAL is planning to boost frequencies on its Brisbane and Perth routes, and "the fundamentals are there for continued strong growth" in the longer term, Mr Featherstone said.
Outbound demand from the Philippines will be supported by the country's robust GDP and population growth, with an expanding middle class, and PAL intends to increase its services to match demand.
Australia will feature in Air India's ambitious international fleet and network growth plans
Air India has doubled its frequencies to Australia over the past two years, although that was from a low base, said the airline's CEO Campbell Wilson. It flies a combined 17 flights per week from Delhi to Sydney and Melbourne and from Mumbai to Melbourne.
The chart below shows that Air India's capacity in the Australian market is now significantly above what it was operating in 2019.
Air India: capacity between India and Australia, as measured by weekly one-way seats, 2019-2024
Mr Wilson said that there was great potential for Air India to expand in Australia, with additional frequencies and new routes.
"As soon as we get more aircraft we'd like to put more into Australia, absolutely", he said. The airline has 64 widebody aircraft on order as part of a massive fleet upgrade programme.
As with Vietjet and PAL, Air India can benefit from its country's large diaspora. The Australian government estimates there are more than 700,000 Indian-born people in Australia, and the total is projected to surpass one million by 2035. In terms of tourism, Australia is ranked in the top three places Indians want to visit, Mr Wilson said.
VIDEO: International inbound travel - meeting demand and building crucial connectivity
Australia continues to top global lists of must-visit destinations for 2024.
Airlines continue to add routes and increase capacity where they can, with all signs pointing to continued growth through 2024. At the same time, some recent political decisions concerning bilateral agreements have brought Australian air services policy into sharp focus.
-
With a number of international markets nearing, or at, the limits of bilateral capacity, is there a need to rethink the implementation of Australia's 'capacity ahead of demand policy'?
-
Should more Open Skies agreements be pursued with major regional and trading partners?
-
With slots limited at many major capital airports, is there a better way to coordinate rights allocations involving consultations with stakeholders like the states, airports, airlines and regulators?
WATCH this exclusive CAPA TV video...